HUD Scraps Rule to Challenge Racially Biased Appraisals

Another Biden-era housing reform has been rolled back, and it could hit Chicago homeowners especially hard.

The U.S. Department of Housing and Urban Development rescinded a rule that allowed property owners to request a second look at an appraisal if they believed it was racially biased, Crain’s reported.

The rule, created just last spring, enabled reconsideration of value requests when appraisals appeared to violate fair housing laws or nondiscrimination standards.

HUD Deputy Assistant Secretary Jeffrey Little cited President Trump’s Jan. 20 executive order to reduce regulatory burdens as the reason for the rollback. The revised policy removes any mention of race or equity, stating instead that requests for reconsideration of value can only be made if an appraisal failed to consider known factors at the time of evaluation.

The move dismantles one of the federal government’s most recent efforts to address racial bias in home appraisals, a well-documented systemic problem.

Appraisals for Black- and Latino-owned homes are often deflated due to the race of the homeowner or the neighborhood demographic, according to research from Brookings and Fannie Mae. That devaluation hinders home equity growth, a key avenue for wealth-building.

The reversal could have an outsized effect in Chicago, where appraisal disparities are among the nation’s worst. Only Los Angeles had a wider gap in appraised values between white-majority and minority-majority neighborhoods in 2023, sociologist Junia Howell found.

The rollback adds to the wave of federal housing programs recently scaled back or placed under scrutiny.

HUD has frozen funding for the Green and Resilient Retrofit Program — a climate-focused housing initiative — and abruptly terminated dozens of fair housing enforcement contracts, including several with Chicago-based nonprofits.

— Judah Duke